Communication versus (Restricted) Delegation: An Experimental Comparison

Silvia Dominguez Martinez, Randolph Sloof

Research output: Working paperResearch

Abstract

This paper reports the results from a laboratory experiment investigating a manager's decision whether or not to delegate authority to a better informed worker whose interests are often, but not always, congruent. Keeping authority implies a loss of information, as the worker communicates his information strategically. Delegating authority leads to a loss of control. A key aspect of our design is that the manager can restrict the worker's choice set when delegating authority. We find that, in case of delegation, managers (as predicted) put tighter restrictions when interests are less aligned. Workers send more informative messages under communication than predicted by the pure strategy equilibria. This finding neither appears to be driven by lying aversion of workers nor by credulity of managers. Qualitatively, our results are in line with a mixed strategy equilibrium under communication, which strictly outperforms optimal restricted delegation and is relatively close to the optimal stochastic mechanism in our setting.
Original languageEnglish
Place of PublicationAmsterdam
PublisherTinbergen Institute
Number of pages47
Publication statusPublished - 2016
Externally publishedYes
SeriesTinbergen Institute Discussion Papers
Number2016-050/VII

Keywords

  • Delegation
  • Communication
  • Laboratory experiments
  • Organizational economics

Cite this

Martinez, S. D., & Sloof, R. (2016). Communication versus (Restricted) Delegation: An Experimental Comparison. Amsterdam: Tinbergen Institute. Tinbergen Institute Discussion Papers, No. 2016-050/VII
Martinez, Silvia Dominguez ; Sloof, Randolph. / Communication versus (Restricted) Delegation : An Experimental Comparison. Amsterdam : Tinbergen Institute, 2016. (Tinbergen Institute Discussion Papers; No. 2016-050/VII).
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Martinez, SD & Sloof, R 2016 'Communication versus (Restricted) Delegation: An Experimental Comparison' Tinbergen Institute, Amsterdam.

Communication versus (Restricted) Delegation : An Experimental Comparison. / Martinez, Silvia Dominguez; Sloof, Randolph.

Amsterdam : Tinbergen Institute, 2016.

Research output: Working paperResearch

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Martinez SD, Sloof R. Communication versus (Restricted) Delegation: An Experimental Comparison. Amsterdam: Tinbergen Institute. 2016.